Look out from any central London bridge you care to name and you will see an array of cranes peppering the view.
They aren’t there for show – they are working on delivering a 10-year high for City core office completions in 2019, which has underpinned a strong start on the lettings front for the submarket this year.
According to figures from Radius Data Exchange, 3.7m sq ft is set to complete in the City next year, beating the previous recorded high of 2.5m sq ft which came through in 2017.
These under-construction spaces accounted for 42% of space let in the City across the first quarter of 2018, with deals struck at 1 Finsbury Avenue, EC2, 70 St Mary Axe, EC3, and 100 Liverpool Street, EC2, helping the City core to reach more than 1m sq ft of take-up – the only submarket to do so in Q1.
Development cycles have always affected the composition of new City occupation – with figures from 2011 showing that just 31% of all new deals were for new or under-construction space, in stark contrast to what we have seen over the past two years – and especially so far in 2018, which has seen a historical high of 62%.
Whether 2018 remains at that historically high level will most likely hinge on lettings coming through at the biggest development project in the City at the moment – 22 Bishopsgate, EC2; which has attracted interest from insurance firms, albeit without any getting over the line just yet.
Going beyond 2019, it is critical to note that nearly 7m sq ft remains at permission – including more than 1m sq ft each at 1 Undershaft and 40 Leadenhall Street, both EC3. This represents a quarter of London’s “at-permission” office supply, even when you include the large amount of space still yet to start at Stratford’s International Quarter, E20.
Therefore, if occupiers continue to concentrate their focus on new-build and refurbished space, as they have been recently, one can make a strong case for pushing ahead with those projects now and ensuring that the City continues to self-regenerate against a backdrop of perpetually evolving occupier demands.
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